Brussels fires starting gun on tougher China trade policy as Beijing vows retaliation

The European Commission has agreed a new and tougher approach to its trade relations with China. According to South China Morning Post sources briefed on the rare Beijing-focused leadership debate in Brussels on Friday, Trade Commissioner Maros Sefcovic laid out why the bloc needed to take stronger steps to defend itself against a new 'China shock' to its industries. The presentation pointed toward developing a new instrument that would compel companies in critical sectors to diversify and broaden their supply capacity.

The Commission's decision will accelerate work to strengthen surveillance over China-origin imports in core sectors such as electric vehicles, batteries, wind turbines, photovoltaic panels and steel. Statements from the level of Vice-President of the European Commission confirmed that the implementation will be assessed at the European Council's summer meeting. In an initial reaction from Beijing, a Foreign Ministry spokesperson said retaliatory and sectoral measures would follow if the steps were applied and warned the EU against actions 'inconsistent with free-trade principles'.

The stance of EU member states will be key in the period ahead; the industrial heft of Germany and France will have to be balanced against positions in Italy and the Netherlands. Atlantic Council and Bruegel analysts argue that a coordinated strategy with the United States may be more effective than acting alone. This article is not investment or trade-policy advice.